Given that there are thousands upon thousands of funds and trillions of dollars under management, mutual funds are a critical component of the investment scene. Many investors have a large percentage (if not all) of their retirement savings in these vehicles and though there is little need for day-to-day assessment, a periodic review is worthwhile. To that end, then, it is worth exploring where mutual fund investors saw the worst returns for 2011.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Readers should note that this was written with two weeks left in December, and final results may be somewhat different. Moreover, this analysis includes only funds that are open to new investment, have minimum initial investment requirements below $10,000, and assets under management of at least $100 million. (You might be carrying more risk than you think if your fund invests in derivatives. For more, see A Brief History Of The Hedge Fund.)

Emerging Markets Get Submerged
Stock markets across the developing world were weak in 2011, especially in Asia, and it is no surprise that funds focused on those areas top the list of under-performers. The Oberweis China Opportunities fund lost almost 39% in 2011 and the Dreyfus Greater China was scarcely better.

Similar performance can be found in the Eaton Vance Greater India fund, as well as the Matthews India Investor and John Hancock Global Opportunities funds.

Indiscreet Returns
Unfortunately, a few more generalist and discretionary mutual funds appear higher-up on the list of top underperformers than on the top performers list. Bill Miller's Legg Mason Capital Management Opportunity fund had a lousy year, losing about 35% of its value in 2011. Fairholme was likewise a notable laggard this year, losing almost 30% for the year, while CGM Focus fell about 27%.

Not so Resourceful
After sifting through dozens of underperforming emerging market and international funds, investors will also see that there were plenty of weak resource-oriented funds in 2011. The Oppenheimer Gold & Special Minerals Fund dropped more than 25%, as did the Franklin Gold and Precious Metals fund.

The Bottom Line
With the clock running out on 2011, investors should consider whether it is time to take their losses and move on in 2012. With tightly-focused funds like the resource or precious metal funds, it all comes down to investor expectations about metals prices in 2012 and the extent to which they value these funds for their diversification potential. For the emerging markets funds, though, there is an argument to hang on (or for newcomers to buy) for what still looks like above-average long-term potential. (For related reading on emerging markets, see The Risks Of Investing In Emerging Markets.)

Among some of the better-regarded funds, investors may want to look at names like Cambiar Aggressive Value, Nuveen Tradewinds Global Resources and Royce Global Value as holdings that have had a bad year, but could rebound in the years to come.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    5 Mutual Funds that Hold Berkshire Hathaway Stock

    Discover the top five mutual funds most heavily weighted with Berkshire Hathaway stock, and the percentage of their assets dedicated to BRK.
  2. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  3. Mutual Funds & ETFs

    4 Mutual Funds that Hold Tesla Stock

    Obtain information on the four mutual funds that have significant allocations to Tesla Motors, Inc. in their major portfolio holdings.
  4. Mutual Funds & ETFs

    4 Mutual Funds that Hold Apple Stock

    Discover mutual funds offering the most substantial percentage of holdings in Apple, Inc. stock that investors can use to get significant exposure to Apple.
  5. Mutual Funds & ETFs

    Top 5 Precious Metals Mutual Funds

    Obtain information and analysis of some of the top-rated and most popular mutual funds that offer investors exposure to the precious metals industry.
  6. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  7. Mutual Funds & ETFs

    Top 5 Bear Market Mutual Funds

    Discover five bear market mutual funds that investors can turn to for generating maximum capital appreciation during a bear market.
  8. Mutual Funds & ETFs

    4 Mutual Funds to Consider If Interest Rates Rise

    Learn what mutual funds will perform best if interest rates rise. Interest rates can rise due to inflation or to an improving economy.
  9. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  10. Mutual Funds & ETFs

    Top 5 Chinese Mutual Funds

    Learn about some of the most popular and best performing mutual funds that offer investors exposure to the important emerging market economy of China.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Dividend

    A distribution of a portion of a company's earnings, decided ...
  5. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  6. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
RELATED FAQS
  1. Can mutual funds outperform savings accounts?

    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
  2. Can mutual funds invest in private companies?

    Mutual funds can invest in private companies, which may come as a surprise to many investors. It is rare for a fund to have ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!